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Wheat Market Update - Thursday 28th February 2008
EU/US Wheat Overview
Once again over the last few days we have seen an 'explosion' of fund
activity in US Futures markets.
Extended trading limits have failed to dampen the flow of fund buying
on concerns over ever tightening global wheat stocks, (Particularly
quality Canadian wheat).
Chicago wheat futures yesterday traded the equivalent of a £50
per tonne range, up and down, in a matter of minutes, which initially
paralysed trading activity in Europe as traders struggled with market
direction.
London LIFFE May wheat futures closed peaked briefly at £201
earlier this week and currently are valued at £194.
The strength of the US markets have also seen a shift in purchasing
patterns as European buyers are switching towards German quality wheat,
which has in turn moved sharply higher.
So in the current climate of continued extreme volatility the question
is what next?
European wheat prices appear heading for the contract highs seen last
September, when MATIF (French wheat futures) traded in excess of 300
Euros, with increasing demand globally and tight supplies/stocks the
driving factors.
Over the coming weeks timing remains key to trading activity, with
European markets continuing to react to US Futures volatility.
New crop futures have also risen and November LIFFE wheat has recently
traded in excess of £160/t.
Bread making premiums remain firm for new crop, as sellers remain wary
about potential quality.
Global wheat production for harvest 2008 is forecast at 645-655mt (USDA
last week),it feels however that this is the figure we have been trading
for some time, and the concern for many is 'what if' the weather, which
currently has been ideal for crops changes, and projected yields are
reduced?
For New crop prices to fall, traders will want to see some evidence
of increased production, which of course will not be seen until the
combines start to roll.
Summary
Extreme volatility is the best description for recent price action,
and this is likely to remain the case at present both on old and new
crop.
Increasing fund exposure to wheat futures markets globally is also
contributing to the unsettled situation at present.
Wheat Market Update - Monday 11th February 2008
UK & Europe
European wheat futures (Matif) set a new 5 month high on friday, following
the continued surge in US futures that overnight traded at their 30
cent limit up for the fifth day in a row. Strong global demand
and ongoing supply tightness have continued to propel the market upwards.
Physical wheat levels across Europe are now starting to react more actively
to the sharp rise seen in futures markets.
UK LIFFE May futures traded at £192/t which is still some way
below the peak seen last September.
Further upside movement is possible, although likely to encounter periods
of profit taking, as traders view the current situation in the US to
be more an issue concerning Global quality wheat stocks as opposed to
feed wheat availability.
European export demand has picked up with sales of 500-600k of French
wheat reported to North African countries recently.
New crop UK LIFFE November futures closed at £155.50 in sympathetic
reaction to the old crop rise, but although well underpinned, the prospect
of global production (weather permitting) returning to c.650mt next
season, has dampened traders enthusiasm to push values upwards at the
same pace as the current old crop rally.
World Wheat
Minneapolis wheat futures continue daily to set fresh record highs,
as demand for quality Spring wheat continues at a near panic pace!
In markets like this a level needs to reached at which demand is rationed
in favour of cheaper alternatives, current price direction would suggest
that this has not been reached yet for the domestic market in the US
to switch.
Chicago Board of Trade (CBOT) wheat futures have also set new all-time
highs led by Minneapolis, but like the UK remain prone to profit taking
as traders remain wary that the real problem surrounds quality wheat
availability. US futures trading limits for wheat will rise to 40 cents
from 30 cents this week.
On Friday the USDA released their latest Supply and Demand update,
and with total export sales already at 97% of the target set for the
year, the market will be eager to see whether the USDA announce intentions
to apply the brake in order to not exceed their targeted objectives.
The alternative for the USDA would be to raise their export objective
volumes, at the expense of a further reduction in ending stocks.
At present global demand for wheat continues to be seen and will remain
supportive to old crop price movement.
Summary
Traders are starting to express opinion as to the likelihood that the
current market scenario in the UK will see a return to the contract
highs seen back in September. European old crop markets are ‘shirtailing’
the epic rise seen in US futures and in the short term this looks like
being a scenario that is set to continue. New crop futures will
remain sensitive to crop development, but will gather support from old
crop rising.
Wheat Market Update - Monday 4th February 2008
UK & Europe
Price volatility on both old and new crop has continued.
Old crop LIFFE May futures have eased back from the £190 peak
seen two weeks ago, but finished last week on a firmer note and are
up once again today following firmer French Matif futures.
A continued lack of fresh export business has weighed on the market,
not helped by the continued strength of the Euro. The ongoing
use of Maize, Sorghum and Tapioca, competing for wheat in livestock
diets has also weighed on prices. Russia’s export tax remains
in place which should be supportive to other EU wheat sources when export
demand does return in volume.
Farmer selling has remained low as prices have fallen, it is estimated
that 80% of farm supply is sold so far.
New crop values remain underpinned, and although crop development across
Europe is good at present, traders remain extremely cautious over future
weather patterns between now and harvest.
LIFFE November futures are valued at £150 having peaked at £155
two weeks ago.
World Wheat
Argentina re-opened its export programme, and this was the signal for
a sharp sell off in US futures markets. New wheat exports from
Argentina will be limited to 2 million metric tonnes, spread over the
next 5 months.
Minneapolis wheat futures have reached record highs, with front month
March racing through $14 per bushel in overnight trading. High
demand and dwindling supplies of quality wheat, continue to fuel the
market, a situation that looks set to continue between now and harvest.
Summary
Price movement on both old and new crop remains extremely volatile.
The timing of entering the market is key as opportunities present themselves,
and then very quickly disappear.
New crop price movement remains susceptible to weather developments,
whilst old crop direction will continue to encounter supply and demand
fundamentals.
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